The Goods and Services Tax (GST)
The Goods and Services Tax (GST) is the biggest reform introduced to the Indian tax system since the establishment of its economy, 25 years ago. This tax system can be explained in 10 points, as follows:-
1-GST is a multi-stage system that will be imposed on each stage of an item (production to the last stage). Thus putting an end to the cascading effect of taxes and reducing the tax burden on the final customer.
2-Manufactures and Service providers get to enjoy unchecked reduction of tax pay during output but with GST the manufacturer or service provider will get credited only if their invoices tally. Thus helps in checking for tax evasion.
3-Under GST all goods and service tax rates can be divided into four sections –
- 18% and
- 28%. The business will be required to file returns each month; however government has let businesses file late returns for the first two months.
4-There will be 3 applicable GST taxes –
- CGST (collected by Central government),
- SGST (collected by state government) and
- IGST (collected by central government for inter-state sales) revenue. No tax will be applied on exports of services or goods but input tax credit can be claimed by exporters.
5-GST is exempted for companies with an annual turnover of Rs.20 lakh whereas service providers and manufacturers with an annual turnover of Rs.75 lakh can avail a composition scheme.
6-Retailers and manufacturers can carry forward input tax credit of up to 60% for 90 days (till June 30) for stocks unsold before GST rollout.
7-GST contains an anti-profiteering clause which will be used only if forced. An authority to look over any reduction in tax rates of any supply of services and goods will be appointed.
8-Every decision regarding GST will be made by the GST council only after recommendation. Only after a 75% majority, that includes Centre and minimum of 20 states majority will be required for the decisions.
9-Alcohol and petroleum products will be kept out of GST for now, however the council will take a decision on a later date.
10-A single interface will be ensured as the all of 90% of taxpayer (turnover below Rs. 1.5 crore) will vest in state tax administration whereas the other 10% in central tax administration. For the next five years, any revenue loss for the state due to GST implementation will be compensated.